MUMBAI (Reuters) - The Reserve Bank of India (RBI) has laid down draft rules for companies to sell rupee bonds offshore, setting a limit on the price of the bonds at 500 basis points above government bonds of similar maturities.
The price cap is not particularly restrictive, but the appeal of the bonds to offshore investors is likely to be limited for now, analysts said. The value of the rupee is uncertain as an increase in U.S. interest rates begins to look more likely.
"Given the current pricing of dollar bonds, it is unlikely that the issuer will be able to raise the local currency bonds offshore at a lower rate than from the local market," said a senior debt capital market banker.
India's plans to allow companies to sell rupee bonds offshore, a step towards full capital-account convertibility, are being eclipsed by the rising cost of funds in international markets. That is making it harder for cash-starved businesses to take advantage of the relaxed rules.
The RBI also said ?Indian banks will not have any access to the rupee-denominated offshore bonds.
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The RBI invited comments from outsiders on its draft circular by June 15.
(Reporting by Abhishek Vishnoi and Suvashree Dey Choudhury; Editing by Larry King)
